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June 4, 2013

Workers Need Retirement Motivation: Prudential

Women, more educated workers more likely to be highly motivated

Most employees are only moderately motivated to save for retirement, according to research released May 30 by Prudential. Although about 90% of employees feel contributing to a retirement plan is important, nearly 60% feel they won’t ever be able to save enough for a comfortable retirement.

Prudential’s Lifetime Saver Commitment Profile is an index to help employers identify employees’ level of motivation and satisfaction with their retirement plan. The index is based on responses from 690 workers who took an online survey last summer. Respondents were between 21 and 64 years old, and all were eligible to participate in their employer’s retirement plan. Respondents with a score between 75 and 100 were rated as highly motivated. Those who scored under 49 were rated less motivated.

Two-thirds of respondents scored between 59 and 74 on the index, and just 13% scored as highly motivated. Unsurprisingly, older respondents were more likely to score above 75. Just 7% of respondents between 21 and 29 were considered highly motivated, compared with 18% of those between 51 and 64.

Prudential found that in addition to older workers, the highly motivated group also had a higher proportion of women and was more educated. They also had more investable assets and less debt.

“Our research revealed that the more motivated employees, who include a higher proportion of women, older workers and the well-educated, share a proactive approach to retirement planning and have more savings, while many other employees still need guidance,” George Castineiras, senior vice president of Total Retirement Solutions for Prudential, said in a statement. “Employers can assist their less-motivated employees by simplifying retirement workplace plans and offering solutions that are easier to understand and focus on employees’ individual needs.”

The survey found 40% of respondents in the highly motivated group expected to contribute between $2,500 and $9,999 by the end of 2012, and 36% expected to contribute more than $10,000. They also have more saved in non-employer-sponsored accounts. The report found the median balance in retirement savings accounts in 2012 was $7,500 for highly motivated respondents, compared with $1,750 for moderately and less motivated respondents. The median balance in highly motivated respondents’ employer sponsored plans was $62,500, compared with $37,500 for those with lower motivation to save.

Highly motivated employees were more likely to rate their employers’ plans well on several key factors. Only 69% of less and moderately motived workers said their employers’ plan keeps them focused on retirement savings, compared with 89% of highly motivated workers. Three-quarters of the less motivated groups said their employer plan was critical to their retirement success, compared with 94% of the highly motivated group. Less and moderately motivated employees were also more likely to call their employer sponsored plan intimidating, complicated or risky.

“Plan sponsors are looking for solutions to help inspire their workers to save more for retirement,” Castineiras said. “This research shows us that most American workers, regardless of age, are not preparing well for retirement. And more than half, who are eligible to participate in their employer sponsored retirement plans, don’t believe they will ever be able to save enough for a comfortable retirement.”

To counter those feelings among the lower motivated people, Prudential recommended employers keep workers engaged by making savings behavior “more personally rewarding” by focusing on post-retirement goals like being able to spend more time with significant others or pursue valued interests.

Employers should work to reduce barriers like confusion and intimidation by showing employees personally relevant solutions that focus on what individuals value most in order to motivate them more. Live webcasts can help make saving easier and more accessible.

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